Bernstein expert Toni Sacconaghi Jr. wishes to know why that is. “If set up base development is healthy, why is iPhone development stagnant?”

It’s a great concern. Among Apple’s more powerful strengths is its large audience of long time iPhone users. Individuals have the tendency to purchase a brand-new phone every 2 or 3 years, so the historical expectation has actually been that the set up base will drive future sales.

Some experts even anticipated a “super-cycle” to emerge in 2015 as older iPhone users re-upped into the brand-new iPhone X.

Rather, sales decreased.

The set up base isn’t really concerning the rescue anytime quickly, either. “In spite of this strong development in set up base, we … do not anticipate iPhones to grow in FY 18, the 3rd straight year of flat-to-declining systems,” Sacconaghi composed in a current note to customers.

Now, Sacconaghi thinks he has actually determined why it is that the “installed base” can grow at 30% while brand-new system sales are drooping. The base is being sustained usinged, pre-owned and resold gadgets. New iPhone replacement sales are basically flat, and all the development remains in the pre-owned market, Sacconaghi states:

” Development in Apple’s set up base of used/resold gadgets describes the detach in between set up base development and lukewarm system development. We approximate that the set up base of utilized iPhones is now 227 million, or almost 30% of iPhone’s overall set up base.”

” The result is that Apple’s iPhone set up base development of * brand-new * phones –– most likely the very best prominent indication of future iPhone sales – might be lower than lots of recognize, and seems flat in FY 18.”

Sacconaghi thinks as lots of as 65% of brand-new iPhones will be resold this year, including 100 million utilized iPhones to the pre-owned market yearly. That suffices old phones to minimize the upgrade rate for brand-new phones. The total upgrade rate will decrease from 36% in 2015 to 22% in 2019, Sacconaghi approximates:

This remains in some methods excellent, since it broadens the Apple universe of users and their gadgets. Those 1.3 billion users will still be spending for apps, music and motion pictures through iTunes, Apple Music, the App Shop and Apple’s other “Solutions” profits.

However if Sacconaghi is right, it suggests brand-new iPhone sales are being cannibalized by older phones that still work well. An iPhone 6S is functionally really just like an iPhone 8. And with the cost of an iPhone X at more than $1,000(or £& pound;-LRB- ***********************) in the UK), poorer users have more reward than ever to purchase an utilized phone instead of a brand-new one.